With a number of issues to address, from concerns about a new housing development proposal to the future of Durham's debt problem, Monday night's City Council meeting attracted the attention of a number of guests-Durham residents and corporate presidents alike.
One year after the Rice Financial Products Company first created controversy among Council members, company President Don Rice addressed the body again. This time, however, his proposal was slightly different.
Rice first approached the Council last year with a proposal for a leveraged debt swap-a transaction that would help the city save money in paying off its debt. Although the proposal was initially passed in a 4-3 vote by the Council, the city pulled out of the transaction in June when the company failed to obtain a AAA insurance rating.
Now City Manager Patrick Baker is asking the Council to reconsider a transaction with the financial company despite its AA insurance rating. The transaction, which was originally pitched as a leveraged debt swap, received much criticism from Council members as well as community experts who claimed the deal was too risky for the city.
After a heated debate between Rice and Council member Eugene Brown, who has remained one of the most vocal opponents to RFPC, the Council passed, 5-2, a movement to restrict further negotiations of a deal swap to RFPC.
At the urging of Baker, RFPC's new proposal will remove the leveraged aspect of the swap, making it a more standard "plain-vanilla debt swap."
Council members Diane Catotti and Brown both expressed concern about proceeding with RFPC for the debt swap.
"Things have changed since last year with this company," Brown said, referring to a civil lawsuit the company is facing in the West Basin Municipal Water District in Southern California. "Is this a firm we want to continue to do business with?"
Brown's main concern, however, was the restricted negotiations for the debt swap. "Not to open this [deal] up to competition would be foolhardy by this city," he said.
But Council member Mike Woodard said keeping the deal closed to competition would not be out of the ordinary.
Brown's concerns expanded to include the integrity of the company and its president. "Rice is probably the only swap dealer in the nation that is currently being sued by an elected board," he said. "It's been a long and crooked road of ambush in our dealings with Rice."
In an interview after the meeting, Rice asserted that his company operates with integrity. "I'm very proud of the work we did in West Basin," he said, noting that the company saved the district $4 million through the transaction.
Rice also said the company's AA rating is not as significant of a detriment as his opponents had claimed. He cited Goldman-Sachs and Bank of America as other swap providers with only a AA rating.
With the final vote taken, however, Brown said he will have to find new ways to fight the proposal and ensure that taxpayer's dollars are not lost unnecessarily.
Council members agreed to defer any additional consideration of the swap deal to the April 3 meeting.
In other business:
The Council unanimously passed a request to add a $1 surcharge to each taxi trip, effective immediately. The increase will make up for high gas prices that taxi companies have been absorbing. The surcharge will remain in effect for six months.
The Council also postponed a vote on development in Goodwin Crossing until the April 3 meeting at the request of residents who claimed the development project has been poorly planned.
Get The Chronicle straight to your inbox
Signup for our weekly newsletter. Cancel at any time.